Temasek Assets Likely Fell First Time Since 2008 on China Rout

  • Portfolio shrank on decline in Asia, Singapore holdings
  • Investment firm had fewer transactions in year ended March 31

Temasek Assets Likely Fell: CIMB

Temasek Holdings Pte’s portfolio probably declined for the first time in seven years as stock markets plunged amid a slowing Chinese economy and uncertainty over U.S. Federal Reserve policy.

The value of the Singapore state investment firm’s holdings decreased by 13 percent to S$231 billion ($170.6 billion) in its fiscal year ended March 31, according to an estimate by CIMB Private Banking. That would be the first decline since the 12 months ended March 2009. Temasek’s assets rose to a record S$266 billion in the prior fiscal year.

“It shows how exposed Temasek’s portfolio is to the harsh realities of the stock markets,” Song Seng Wun, an economist at CIMB Private Banking in Singapore, said by phone.

Temasek this year has made changes at the top echelons, reshuffling senior management as part of a succession plan as it navigates feeble global growth and market volatility from China to London. The investment firm had more than half of its assets in China and Singapore as of March 2015, leaving it particularly exposed to a 21 percent slump in China’s CSI 300 Index and an 18 percent decline in Singapore’s Straits Times Index in the 12 months that followed.

Fewer Deals

The state investor made fewer deals in the past year as Chief Executive Officer Ho Ching, who oversaw a more than doubling of assets since she took over in 2004, took a six-month sabbatical. Ho, who returned to work in October, oversaw the completion of 44 deals in the year ended March 31, down from 55 in the previous period, according to data compiled by the London-based Sovereign Wealth Center.

“They didn’t follow through on the big-ticket transactions they had in the year before,” Enrico Soddu, head of data at the Sovereign Wealth Center, said.

The value of Temasek’s 51 percent stake in Singapore Telecommunications Ltd., its biggest holding by market value, declined S$4.5 billion as the shares fell 13 percent during the fiscal year, according to data compiled by Bloomberg. Its 30 percent stake in lender DBS Group Holdings Ltd. fell S$3.7 billion and its stake in rig builder Sembcorp Industries Ltd. shed S$1.1 billion. Temasek is the biggest shareholder in about a third of the 30 members in the Straits Times Index.

Standard Chartered Stake

Overseas investments also weighed on the portfolio. The London-listed shares of Standard Chartered Plc, of which Temasek is the biggest shareholder, more than halved during the reporting period, shaving S$6.2 billion off the holding. Standard Chartered in December raised about $5.1 billion as Chief Executive Officer Bill Winters sought to restore profitability at the British lender.

Temasek made S$30 billion in new investments in the 12 months ended March 2015, the highest in seven years, it said in its annual review in July last year. Among its biggest investments was $5.7 billion for a 25 percent stake in Hong Kong retailer A.S. Watson & Co., completed in April 2014. It also increased its stake in U.S. pharmaceuticals maker Gilead Sciences Inc. by $800 million.

In the last fiscal year, the investment firm loaded up on stakes in U.S. pharmaceutical and health-care firms including BeiGene Ltd., Illumina Inc. and Regeneron Pharmaceuticals Inc., according to filings with the U.S. Securities and Exchange Commission. Temasek also added to its holdings in telecommunications provider Level 3 Communications Inc. and bought a stake in IT technology firm EMC Corp.

Among Temasek’s biggest divestments was the sale of its 67 percent stake in Singapore’s Neptune Orient Lines Ltd., resulting in S$2.3 billion in receipts, according to data compiled by Bloomberg. It also sold its 83.8 percent stake in Singapore chip tester Stats ChipPac Ltd., a stake that had a value of S$920 million as of June 2015, according to the data.

An early investor in Alibaba in 2011, Temasek reduced its U.S.-listed holdings in China’s biggest e-commerce company during its last fiscal year, cutting the value of its stake by $667 million to $3.8 billion.

The state-owned investment firm embarked on some significant management changes. In October, it appointed Lee Theng Kiat, the Temasek president who oversaw the firm while Ho was on sabbatical, as CEO of Temasek International, the management arm in charge of all staff other than the CEO and chief financial officer. In April, it appointed two new presidents and reallocated some functions across groups to allow it to face "challenging global times."

Total shareholder return, which includes dividends, averaged 16 percent in Singapore dollar terms through March 2015 since the firm’s inception, according to its website.

Unlike GIC Pte, Singapore’s sovereign wealth fund, Temasek almost exclusively invests in equities and has few restrictions on how much it can hold. Norway’s sovereign wealth fund, the world’s biggest, isn’t allowed to own more than 10 percent of any of its portfolio companies and seeks to have no more than 60 percent of its portfolio in equities.

Before it's here, it's on the Bloomberg Terminal.